An unexpected boost in German IFO business sentiment gave the Euro a lift yesterday. The data showed sentiment at a three year high, hitting 106.7 versus a forecast level of 105.5 and reaffirming the positive data flow from Germany over the past month.

However, Irish woes continued with Standard & Poor’s, the ratings agency, downgrading their debt to AA- with a negative outlook.

The huge cost of supporting the Irish banking system will push debt towards 113 per cent of GDP according the S&P estimates, well above the Eurozone average putting increasing demands on the Celtic tiger’s public finances and creating serious headwinds for economic growth.

Irish ministers were understandably furious, but the fear is the austerity measures designed to reduce the government budget deficit may make the job harder because of increasing unemployment and depressing tax revenues.

This fear, applicable to the other indebted Eurozone nations, is once again hanging over the Euro and is allowing Sterling and the Dollar to regain lost ground against it.